Racal Electronics Plc’s shares fell eight pence to 250 pence after the Bracknell, Berkshire-based company reported what it thought was good results but city analysts were distinctly unexcited by figures at the low end of their expectations. Racal chief executive David Elsbury was keen to sing the praises of the group’s investment in the UK national lottery operator Camelot Plc. It is a wonderful investment, we are very glad we made it, he told Reuters. But Camelot’s contribution – Racal holds a 22.5% stake – was relatively small: ú8.4m in pre-tax profits out of a total of ú58.3m, which was 121% higher than the previous year. However, that year included charges totalling ú19.6m. The main reason for disappointment was in the still troublesome data communications sector. Pre-tax profits here – including the Camelot contribution – were up 309% at ú14.3m from turnover that edged 3% higher to ú384.2m. The network services business achieved strong revenue growth, up 74% to ú74m, but the data products unit continued to lag. The company admited that data products revenues were ú25m lower than expected and that the market remains extremely difficult, but that next year should see the decline reversed. Some analysts were not so sure: the turn-around has not really happened, said Lehman Brothers Ltd’s Keith Hodgkinson. Radio Communications achieved a 24% rise in turnover to ú179.4m and operating profits rose 15% to ú20.5m. As investment in oil exploration declines, so does the turnover of the marine and energy division. it fell 2% and operating profits plummeted 74% to ú6.8m. The energy business is the problem here, and growth will be limited this year. The defence, radar and avionics business, if not quite flying high, had a better year. Turnover was up 5% to ú116. 1m, and although operating profits slipped slightly to ú6.7m, this year they are expected to be around ú10m following the acquisition of Thorn EMI Plc’s Sensors group for ú18.9m (CI No 2,636). The amount was ú1.5m than originally predicted, and has rseulted in a provision of ú22m for reorganisation and contract costs. Lehman Brothers’ Hodgkinson said that a provision of between ú10m and ú15m was expected, causing further pressue on the stock. Specialised businesses, which includes Satellite Information Services, beaming horse racing into UK betting shops, had a healthy year, with profits up 29% to ú26.6m and turnover rising by 8% to ú144m. This year is expected to be good, but not that good. The final dividend of 3.25 pence makes a total of 5 pence, up 18% on last time. Racal was unusually terse with its outlook, offering merely that it expects another year of good progress.
